海角大神

What鈥檚 inside? Here are the questions answered in today鈥檚 reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
聽1. Back to school dilemma
聽2. Precautions before romantic trip
聽3. Pool membership dilemma
聽4. Favorite vegetable garden plants
聽5. Telling a story to kids
聽6. Handling massive student loans
聽7. Spending and saving focus
聽8. Is having another child hard?
聽9. Useful IRA tips for education
聽10. To refinance or not?

When school is in session, my work day begins when the kids leave and more or less ends when they return home.

This is a good thing in that it gives me a set period of quiet time in which to work, which mostly means writing.

This is a bad thing in that it puts a cap on things when I鈥檓 in a writing groove. There are days where, if I did not have such an end cap, I鈥檇 write until midnight.

In the end, the good outweighs the bad. I鈥檇 far rather prepare a snack for my children when they get home than continue to work.

Q1: Back to school dilemma
聽I am in a position to go back to school for a post-graduate degree using my husband鈥檚 GI bill. This could not have come at a better time for a variety of reasons, which I won鈥檛 go into here. We are truly fortunate 鈥� and here is my dilemma, as I do not want to squander this opportunity:

Do I go back and get the most bang for my buck and get a law degree/MBA or something along those lines, even though neither one of those areas really float my boat (that I know of!), though I think I would be fairly good at either?

Do I totally go the other way and just go back and get say, a degree in music, or theater, or French 鈥� all of which totally excite me, but are less鈥�.practical, in terms of ROI?

I suspect the answer lies somewhere in between, but I am at a loss as to how to objectively assess my skills/interests/talents moving forward. Do you know of any online assessment tools/books/resources for 40-year old wannabe grad students looking for a subject to study? One that will both be practical with regard to longevity (what if, god forbid, I become a single parent to my son and have to support him on my own) but also tap into my talents and interests (鈥渋f you love your job, you鈥檒l never work a day in your life鈥� type idea)?
聽- Augie

There are a lot of skill assessment tools online, such as this one from iSeek, that can help point you in a solid direction when it comes to pairing your skills with a worthwhile and potentially lucrative career. If you want more, the best book I鈥檝e found for digging into one鈥檚 career path is What Color Is Your Parachute? by Richard Nelson Bolles.

I think the best option for you is, as you mentioned, somewhere between the two. I don鈥檛 think it鈥檚 a good idea to go into a field that you have no interest in whatsoever, because unless you鈥檙e exceptionally gifted, you鈥檙e not going to make a strong career out of it. From what I鈥檝e seen, most people can make it in a field with natural talent or a lot of passion and drive, and people who really succeed tend to have both. If you don鈥檛 have either鈥� it can be pretty tough.

Dig into the assessments above and see if you can find a career that excites you (at least a little) and earns a good income, too. I鈥檓 a firm believer that there鈥檚 something out there like this for everyone.

Q2: Precautions before romantic trip
聽Next month, I鈥檓 going to fly to Boston to meet a guy I met on a discussion forum. We鈥檝e been talking for months and our relationship has moved to the point where we鈥檙e going to meet. I鈥檓 really excited!

In that excitement, though, is a little bit of worry. In all honesty, I鈥檝e never met the guy and I don鈥檛 know for certain what will happen when I go. Do you know of any financial precautions I should take?
聽- Jill

A friend of mine did this a few years back. I鈥檒l tell you what I told her.

First and foremost, never go anywhere without your cell phone 鈥� and don鈥檛 go anywhere without letting someone you know at home know where you鈥檙e going. If you need a moment, go to the restroom before you leave to go anywhere and send a text to a close friend letting them know where you鈥檙e going. This is a safety precaution, nothing more, nothing less. If the guy seems stressed out about this, then there鈥檚 a big red flag for you. He should understand the situation you鈥檙e in and, if anything, encourage you to do this. The more info you can share with people at home, the better.

Before you leave, make sure several of your friends have your flights, the address of the hotel you鈥檙e staying at, the address of the person you鈥檙e going to visit, and info on any other locations you鈥檙e sure you鈥檙e going to go to 鈥� restaurants and so on.

Also, if I were you, I鈥檇 try to live on cash as much as possible and leave my credit and debit cards in a separate secure place. If the guy is a good guy, this will work fine. If the guy is just trying to scam you or something, your cards would be a good target. I also wouldn鈥檛 take any excessive pieces of personal identification. A driver鈥檚 license will probably be needed for the trip, but things like a Social Security card are probably best left at home (or better yet, in a safe deposit box at a bank).

This might seem to lean toward paranoia, but the entire reason for doing it is to keep you as safe as possible. If you do this and things turn out well, it won鈥檛 have a negative impact on your trip. If you do this and things go bad, you鈥檒l be incredibly glad you took these steps.

Q3: Pool membership dilemma
聽A couple of years ago we moved into a new house that we love and don鈥檛 plan on moving. This past June our daughter was born. Recently we鈥檝e discussed the community pool that is only 2-3 blocks from our house. The pool is open Labor Day to Memorial day and costs $400/year for a family membership. There is a lifetime membership that costs $4,000. It seems to us that the lifetime membership is the better option but we鈥檙e unsure whether to do it now, or wait until our daughter would enjoy the pool more.
聽- Will

Before I spent any of that money, I鈥檇 want to know everything about the pool. Is it crowded during the times you鈥檇 want to use it? Is there always a lifeguard on duty (for that kind of money, the answer needs to be yes)? Are there times when the pool is closed? Does the fee include swimming lessons for your daughter? Would you use the pool right now, with your daughter being less than a year old?

The real question is whether that pool provides enough value for your family at a rate of $400 a year. If it does not, then I wouldn鈥檛 get either membership.

Now, if you do decide that the pool has enough value for that $400 a year rate, I would buy a single year and see how it went, particularly if that $400 went toward the $4,000 lifetime membership. At the end of that year, I鈥檇 reevaluate my long-term situation as well as the value I got from the pool. I鈥檇 also look into additional issues with such a membership, such as whether lifetime memberships are transferable and whether or not the $400 invested in a year鈥檚 membership can go toward an annual membership.

Will had another question.

Q4: Favorite vegetable garden plants
聽We just planted seedlings for our garden a few weeks ago. This got me to thinking, what are the best (cost savings or taste wise) items to plant. Here鈥檚 my top 3.

Tomatoes (taste)
聽Green Beans (taste)
聽Bell Peppers (cost)

What鈥檚 your top 5?
聽- Will

I agree with those three. They鈥檇 be in my top three for reasons much like what you name. They鈥檙e all rather easy to grow, too.

On top of those three, I鈥檇 add cucumbers. They鈥檙e similarly easy to grow and can be eaten in a variety of ways. Our family loves to make what we call 鈥渞efrigerator pickles,鈥� where we put fresh cucumbers in a vinegar and water solution along with some dill and eat them at our convenience over the next few weeks.

If I had to pick a fifth one, I鈥檇 choose strawberries. Again, they鈥檙e pretty easy to grow (if we haven鈥檛 killed them, they must be easy) and they produce such wonderful fruit late in the summer.

Q5: Telling a story to kids
聽I read my kids a story every night before bed. Some nights, though, they ask me to tell them a story. I manage to make something up and get through it and they seem happy, but it always seems awful to me. I know you tell your children a lot of stories. Any tips?
聽- Alan

For starters, I usually include my children (and often myself) as some of the characters in the story. My children love tales where they are the protagonists, perhaps receiving help from a grizzled old mountain man known as Dad along the way. Doing this immediately ties the children into the story.

I also often borrow plots wholesale from movies I鈥檝e seen that perhaps they haven鈥檛 seen. I鈥檝e reused pieces of The Princess Bride countless times as a general plot guidance, for example. I don鈥檛 completely duplicate the story, but I use enough of it so that I know where the story is going when I start.

As I go along, I constantly allow them to add details. In fact, I usually prompt them for it. 鈥淭he heroes are passing through the forest when they come upon a very unusual tree鈥�. what鈥檚 unusual about the tree, do you think?鈥� They come up with some idea and then I just roll with it. It keeps them engaged throughout the story and often adds flavor I would have never considered.

The end result is usually a memorable bedtime story for the children. They often request that I do this.

Q6: Handling massive student loans
聽My husband of less than two years has quite a student loan bill that we are going to begin paying back now. You would think by the amount he owes, $110,000 that he was a doctor. But no, this is what happens when you have a terrible paying job for years, go into forbearance on your loans and end up paying $40K+ in capitalized interest alone. I think the original bill for his private college education was about $40K鈥�I鈥檓 not totally sure based on the paperwork I have seen.

He went to this private school after serving 2 years active duty in the army and 4 years in the reserves. I don鈥檛 really know what kind of government discount or benefit he got from that. I do know that he took every cent of his student loan and used it not just to pay for school but also to pay for books and general living expenses. His career is in communications and he was in an extremely low-paying job for at least 5 years. During that time he was outrunning creditors, car reposessors, etc. and paying back his student loan was not a priority.

Today, 15+ years later, he is finally making good money at his alma mater within the last three years. He began taking classes for a masters degree a couple years ago, which delayed the need to pay back these loans yet again, but now they have become due as he is nearly finished his degree.

We have looked into public loan forgiveness options where he would pay it back 120 times in a row and be forgiven on the loan. The trouble I have with that program is that you make 120 payments and there isn鈥檛 much in the way of forgiveness鈥�by my calculations, you pay back the entire loan. They gave him a quote of $1600 per month, which would more than cover the cost plus interest.

The loan is approximately $110,000 at 8.5% interest, and he owes $754 per month. It鈥檚 certainly do-able for him/us, but slows down our cash savings. I wondered if you have any suggestions as to ways to get this loan down or if we are stuck? They didn鈥檛 offer him a lower interest rate, and I don鈥檛 even know where to begin to look to try to find one for a student loan. He actually thinks that there is going to be some miracle plan that will relieve him of this debt, whether that is some sort of grant, something from the military, etc. I don鈥檛 know what planet he thinks that will come from, especially if he doesn鈥檛 do the legwork to find it.

We got a decent tax return back, about $3,500, and he used $2,000 as a payment towards the principle on the student loan. Do you suggest tossing extra money at this loan as often as possible or sticking to the outlined payments? On one statement it estimated that he鈥檇 end up paying $220,000 over the course of this loan with all the interest due!
聽- Shauna

If you鈥檙e stuck with this loan, tossing extra money at it is always going to be a good idea. It will mostly affect you in terms of reducing the length of the loan, but every extra dollar you throw at it will trim a couple of dollars (or more) off of the last payment you make on the loan.

Now, are you stuck with this loan? Probably. I wouldn鈥檛 expect a miracle out of the sky to fix it. However, you likely do have at least some options regarding the loan. The first thing I鈥檇 look at is loan consolidation. I鈥檓 unable to tell if he鈥檚 eligible for loan consolidation or not from your email, but if he is, it鈥檚 well worth looking into as it will significantly reduce your interest rate. Even if you鈥檙e not eligible, you may want to talk to other lenders besides your current lending institution to see if they can make a better offer and take over the loan.

How do you begin looking for these types of offers? The first place I鈥檇 check is the financial aid office at his alma mater. Given that he attended there and that he currently works there, I鈥檓 pretty sure they鈥檒l be able to offer some suggestions for his situation and perhaps find you guys a better lending institution to work with.

Shauna had a second question.

Q7: Spending and saving focus
聽What is the best way for us to spend our money when we have some left over?

We have a mortgage that is too high to refinance, but we are looking into it anyway. $281K in a 30-year fixed at 5% that we bought in late 2009. According to Zillow, our house is now worth about $259K. The house appraised for $279K when we bought it (we got a seller鈥檚 assist hence the higher mortgage). We recently did some home renovations (again, money burning a hole in the pocket plus want versus need鈥�did we NEED to renovate half of the kitchen? no. Are we hoping that this would have added to the value and aesthetic of the home? Yes. Not sure how to find that out鈥�) that cost about $6,000. We took a wall out between the dining room and kitchen, cut a doorway into another wall, bought a kitchen island and installed granite countertops (didn鈥檛 need to redo the cabinets or appliances).

We have approx $10,000 in savings at the credit union account we opened together (less than 1% interest rate) that is going to be minus about $3,000 after these home reno bills are paid. I have an additional $4,000 in a savings account that he has equal access to, plus a $6,000 ING savings account (about 3% interest) that he doesn鈥檛 know exists (until we do our SCFR worksheet). We don鈥檛 have any particular goals for these savings other than having an emergency fund set up. We like to travel, but when we go to pay the bills for the renovation or the travel, my husband prefers to take it out of what he has left in his checking account rather than pulling out of savings, therefore strapping himself for the month a little bit. I prefer to pull out of savings, though it really pains me to do so.

His car has 129K miles on it and he plans to keep it forever. My car has 84K miles on it, only about $700 left on the loan (will be paid off in June), and I plan to keep it as long as I can, or until we have a child. Since I am going through infertility treatments right now (about $150 a month), that means I鈥檒l have the car a while yet (we do not plan to do IVF鈥�if we aren鈥檛 meant to have children we are perfectly ok with that.)

As for retirement accounts, I save 5% with a company match of 4% that started in January 2012. I am currently considering changing jobs even though I have only been here a little over a year. I do not know what percentage my husband saves, but I know he does make contributions.

I try to cut my expenses as much as I can. I clip coupons and bring my coffee, breakfast and lunch to work as often as is feasible. I only shop sales and never buy clothes full price. I hardly ever buy new clothes鈥�maybe a few new pieces each season. My credit card bill is not great, however. I have about $1,500 on it and I can never seem to keep it under control. I am trying to use it less and less but sometimes I use it to pay for things I purchase over the internet (like 5K race entries or Amazon.com/paypal purchases), and I don鈥檛 count it in my monthly budget as expenses鈥�it just goes into my budget as a Visa payment of around $300 a month. I can definitely do better there.

Should we be saving more cash, investing our extra cash, making extra payments on our mortgage? When my husband鈥檚 money burns that hole in his pocket, where should I tell him to put it?
聽- Shauna

Given your student loan situation and your mortgage, I think the best thing for you guys to do any time you have some extra money that isn鈥檛 needed for anything urgent is to put it toward one of those debts, preferably the one with the highest interest rate. Every dollar you put toward such a move will save you three (or so) off of the last loan payment you鈥檒l have to make.

I don鈥檛 see anything that you鈥檙e doing wrong, though. You have a solid emergency fund when you consider the whole of your cash savings. You seem to have your spending largely under control and are slowly whittling down your debts rather than watching them escalate. You鈥檙e doing the right things. It just takes time.

One thing that might be useful is to just sit down together one weekend afternoon and spread all of this out. Together, get a picture of how much you have (savings, retirement, home value, etc.), how much you鈥檙e spending each month, how much you鈥檙e bringing in each month, and how much debt you have. Talk about where you want to be in the future, and I strongly encourage you guys to really think about debt freedom (trust me, it feels fantastic). Just talk about things. You鈥檒l feel better about everything if you get it all out there on the table together, trust me.

Q8: Is having another child hard?
聽My husband and I are thinking of having another child. Our first one was a real life changer and our biggest worry is that our second child will bring some disharmony into our life after we finally feel like we have a good balance. Are there any things we should be thinking about?
聽- Andrea

The biggest change our second child brought into our life was during the first year. Since our oldest was only two at the time and still needed a lot of help with basic things (diaper changes, bedtime routines, etc.), we found ourselves pairing off, with one adult handling one child and the other adult handling the other child.

That wasn鈥檛 too much different than what we did before, but with just one child, one parent found themselves free to take care of household tasks or just to relax. That vanished, particularly during the first year, and that was the biggest challenge.

Once our second child got to about nine to ten months or so, we were able to have one parent handle the routines with both of them while the other parent was able to return to housework and other tasks. (This whole pattern, of course, repeated with the third child.)

The first child was the one that caused the real life changes. The changes with the second were more subtle. The changes with the third were pretty easy.

Q9: Useful IRA tips for education
聽[Y]ou can pay for higher education expenses (tuition, books, fees, and even in some cases lodging) from funds in an IRA without the early withdraw penalty. If it鈥檚 a Roth IRA you dont have to pay income tax on the earnings either.

The funds can be used to pay for expenses for yourself, spouse, OR children.

You can see where this will save even more money since you wouldn鈥檛 have to pay extra income taxes. Obviously you would need to choose wise investments here, but you could go for some more conservative investments or just buy up some money market funds, but if you went ahead and invested it in a decent portfolio (mine is all ETFs) then you could actually make some money on it and cut that monthly savings requirement by a large amount.

Wish I had known this last year, so now I have to pay off the student loan I got, but at least this year will be much easier to afford.
聽- Wayne

This certainly works, and it鈥檚 one approach to saving for college.

My only hesitation is that doing this shoots your annual window for IRA savings for retirement. You鈥檙e only able to save about $5,000 a year in IRAs for retirement purposes and for many people, IRAs can be invaluable retirement savings tools. Using them for the education of your children is going to postpone your own retirement, no two ways about it.

For some, that might be an acceptable outcome, but why not use the IRA for your retirement and start a 529 for your children鈥檚 college education? I may use my IRA for education in a pinch, but I鈥檇 far rather have it as a retirement asset. The best gift I can give my children is to not be a financial burden on them when I鈥檓 old, and my IRA will help to ensure that.

Q10: To refinance or not?
聽I鈥檓 looking at refinancing a condo (I rent it out) using the the new HARP 2.0 program. I鈥檓 currently owe around $73K @ 7% in year 11 of a 30 yr mortgage. The loan I鈥檝e been offered is for $78K (closing costs & anticipated spring taxes) @ 4.5% for 20 years. The loan is a $5K difference, but $2K of that will be be offset by exchanging escow accounts between the 2 lenders, which I would sink the payout back into the new loan. If I do the deal, it will save me about $135 a month on my payments. So, I figure the $3K+ on the new loan would be paid off in under 2 years by saving the $135 a month. I鈥檓 not looking to keep this property as rental income forever. I鈥檇 actually like to get it to the point where I could sell it off for what I owe on the loan, which I hope to be in about 5 yrs. Currently properties in the area go for $45K-$50K. I already pay an additional $150 a month & would continue to just pay that same amount on the new loan since I鈥檝e already figured that amount into my budget. Does it make sense to do this deal? Should I refinance this loan at a larger amount, even though I鈥檓 itching to get out as soon as I can? I would love to get out now, but I鈥檓 so far under water, I can鈥檛 get the funds to cover the difference. What are your thoughts?
聽- Jim

If you鈥檙e going to stay in the home, this refinancing makes sense. It lowers your interest rate, doesn鈥檛 significantly extend the length of the mortgage, and reduces your monthly payment. Those are all good things.

I don鈥檛 know how much you鈥檝e shopped around for this deal, but depending on your credit, this is either a good offer or a great offer. You could try for a better one (and you might get one), but it won鈥檛 be significantly better, as the interest rate is pretty competitive.

There is always the option to walk away. However, when you鈥檙e in a fixed rate mortgage that low with that relatively low balance, it鈥檚 probably not a really good option.

Got any questions? Email them to me or leave them in the comments and I鈥檒l attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.